Nick Forsyth looks at the 10p compensation measures

After all the press speculation Chancellor Alistair Darling has announced to the House of Commons his fix for the removal of the 10p rate band fiasco – and it won’t cost business a penny – in the short term. If you visit our website you will have seen our link to the 10 Downing Street petition’s site asking the Prime Minister to refrain from amending the minimum wage amount for childless youngsters which had been one proposal to grant the promised compensation.

I offer our thanks to the 77 people who have signed up to the petition, we may not have had undue influence upon the announcement but the Chancellor did recognise that the economy may be slowing which was one of the main thrusts of our petition.

So what has the Chancellor suggested? Firstly, an increase of £600 in the Personal allowance so that £120 is given back to each tax payer affected by the 10p withdrawal. The speech indicates that £60 will be paid in September 2008 with a further £10 each month till the end of the tax year. As the personal allowance is effective for all tax payers a second announcement was made to reduce the higher rate threshold by £600 so that higher rate tax payers have taken away in the left hand what was awarded in the right hand by the first provision.

This will cost the treasury £2.7 billion and will be funded by additional borrowing.

What remains unclear, for at least this evening, is how this will link in with the National Insurance limits that have been painstakingly aligned to the personal allowance over recent years. No doubt more news will be forthcoming in due course but in the mean time the government have a by election to win!

If you require advice as to how these proposals will affect you please contact your local Lambert Chapman office.

Date:13 May 2008